Economic analysis at NATO

Revived under NATO Secretary General Anders Fogh Rasmussen in 2012, economic analysis at NATO Headquarters seeks to support Allied understanding of the linkages between economics and security, which is essential in today’s complex international environment.

In a way which is distinct from other international organisations and which is focused on the Alliance’s area of competence, economic analysis at NATO lies in assessing the security and defence implications for the Allies of current and potential economic developments, in accordance with Articles 2 and 3 of the North Atlantic Treaty.

Economic factors often determine the ability of both state and non-state actors to finance the means to deter and defend themselves, to project power and influence, and to pursue foreign policy or political objectives.

Targeted analyses of economic developments thus enhance the strategic awareness of Allies, regarding potential threats against their security, and regarding their own capacity, over the medium to long term, to generate the resources to meet those threats. Such analyses also provide support to broader political and military assessments, as well as to the political consultation process among NATO members.

Defence economics

Basic defence economics explores the link between overall macroeconomic conditions and the fiscal capacity that nations may have to finance different levels of defence expenditure. For the Allies, economic developments may influence progress towards key NATO objectives, such as the Defence Investment Pledge agreed by Heads of State and Government at the NATO Summit held in Wales in September 2014. For other countries, an understanding of fiscal capacity supports broader analyses of a particular nation’s potential defence capabilities.

The linkages between technology and security, when seen from an economics perspective, constitute a further centre of focus for defence economics assessments at NATO.

International economic security

Globalisation has enabled the rise of emerging economies and transformed global trade, leading to global changes in economic power, which may gradually translate into broader power shifts, including important developments in the global distribution of defence capabilities. In parallel, national economies are interconnected, and thus inter-dependent, to a degree not seen in previous historical periods.

A first area of assessment in the field of international economic security is therefore to explore the linkages between economic trends and forecasts in different world regions and their possible strategic implications for the security of the Allies, individually and collectively.

A second area of focus includes the study of the potential impacts of economic levers and coercion between states, including both legitimate, multilateral economic sanctions, and unilateral coercive measures, e.g. trade embargoes, within a broader context of tension and, possibly, belligerence. Awareness regarding such measures supports wider discussions on the Alliance’s wider security environment and potential risks and threats to Allies and to NATO partner countries.